Note ban turned out to be blessing for Lendingkart: Mukul Sachan

"The sudden note ban led to liquidity issues for our clients, affecting their ability to repay the loans to us which in turn took a toll on our business performance." said Mukul SachanET CONTRIBUTORS | June 04, 2018, 08:42 IST

The turning point for me as an entrepreneur and for my team was the announcement of demonetisation on November 8, 2016. The situation was grim and we were staring at a great deal of uncertainty during that entire phase.

It looked quite overwhelming for a startup such as ours which was in its early stages, looking to establish a foothold in the financial sector.

Our clients include small businesses, retailers, etc which deal with cash transactions. The sudden note ban led to liquidity issues for our clients, affecting their ability to repay the loans to us which in turn took a toll on our business performance.

SMEs deferred taking disbursement even for the loans which were already sanctioned to them. Our company, which was growing consistently on a month-on-month basis since its inception, witnessed a slack in the monthly business for the first time in 32 months.

Ironically, we also faced liquidity issues as our lenders had frozen debt lines, given the grim macroeconomic scenario in the short term.

Our gross non-performing assets (NPAs), which were below1.5% before demonetisation, rose above 3% post demonetisation. It was an overwhelming and uncertain phase. For a while, we thought of that as the end of our story. But in April 2017, the financial performance numbers for microfinance companies and small banks were out. Many of those players’ NPA had shot up above 6% and few had even breached the 10% mark.

Unknowingly, demonetisation turned out to be our inflection point. It tested us and our digital origination and machine learning-based credit evaluation models providing a business model and dismantled the established and conventional notion of the traditional NBFCs working style of having a physical presence.

The debt lines that got closed earlier, not only opened up again but this time the amounts which were sanctioned to us were much larger after our business capabilities were proven beyond doubt.